Correlation Between NVIDIA CDR and Braille Energy

Can any of the company-specific risk be diversified away by investing in both NVIDIA CDR and Braille Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NVIDIA CDR and Braille Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NVIDIA CDR and Braille Energy Systems, you can compare the effects of market volatilities on NVIDIA CDR and Braille Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NVIDIA CDR with a short position of Braille Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA CDR and Braille Energy.

Diversification Opportunities for NVIDIA CDR and Braille Energy

0.23

Correlation Coefficient

NVIDIA CDR  Braille Energy

Modest diversification

The 3 months correlation between NVIDIA and Braille is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Braille Energy Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braille Energy Systems and NVIDIA CDR is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NVIDIA CDR are associated (or correlated) with Braille Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braille Energy Systems has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Braille Energy go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Braille Energy

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 1.09 times less return on investment than Braille Energy. But when comparing it to its historical volatility, NVIDIA CDR is 2.83 times less risky than Braille Energy. It trades about 0.11 of its potential returns per unit of risk. Braille Energy Systems is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Braille Energy Systems on October 22, 2024 and sell it today you would earn a total of  1.00  from holding Braille Energy Systems or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NVIDIA CDR  vs.  Braille Energy Systems

NVIDIA CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, NVIDIA CDR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Braille Energy Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braille Energy Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Braille Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NVIDIA CDR and Braille Energy

The main advantage of trading using opposite NVIDIA CDR and Braille Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA CDR position performs unexpectedly, Braille Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Braille Energy will offset losses from the drop in Braille Energy's long position.

The idea behind NVIDIA CDR and Braille Energy Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.